While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Buy." Duke Energy Corporation (NYSE: DUK) shares currently have a dividend yield of 4.40%. Duke Energy Corporation operates as an energy company in the United States and Latin America. The company operates in three segments: U.S. Franchised Electric and Gas, Commercial Power, and International Energy. The U.S. The company has a P/E ratio of 21.38. The average volume for Duke Energy Corporation has been 3,296,800 shares per day over the past 30 days. Duke Energy Corporation has a market cap of $49.9 billion and is part of the utilities industry. Shares are up 10.9% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Duke Energy Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, compelling growth in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- DUK's very impressive revenue growth greatly exceeded the industry average of 18.0%. Since the same quarter one year prior, revenues leaped by 62.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 114.9% when compared to the same quarter one year prior, rising from $295.00 million to $634.00 million.
- Net operating cash flow has increased to $1,091.00 million or 25.11% when compared to the same quarter last year. In addition, DUKE ENERGY CORP has also modestly surpassed the industry average cash flow growth rate of 24.61%.
- DUKE ENERGY CORP has improved earnings per share by 34.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DUKE ENERGY CORP reported lower earnings of $3.06 versus $3.84 in the prior year. This year, the market expects an improvement in earnings ($4.34 versus $3.06).
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Duke Energy Corporation Ratings Report.
- PDLI's revenue growth has slightly outpaced the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for PDL BIOPHARMA INC is currently very high, coming in at 92.23%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 58.21% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 201.74% to $54.00 million when compared to the same quarter last year. In addition, PDL BIOPHARMA INC has also vastly surpassed the industry average cash flow growth rate of 20.65%.
- PDL BIOPHARMA INC has improved earnings per share by 24.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PDL BIOPHARMA INC increased its bottom line by earning $1.47 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $1.47).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 33.1% when compared to the same quarter one year prior, rising from $40.18 million to $53.47 million.
- You can view the full PDL BioPharma Ratings Report.
- The revenue growth came in higher than the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 30.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 8.9% when compared to the same quarter one year prior, going from $32.35 million to $35.24 million.
- Net operating cash flow has slightly increased to $73.70 million or 1.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.85%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Senior Housing Properties Ratings Report.
- Our dividend calendar.